Private student loan companies are much less flexible than the federal government. Specific procedures for cases where a borrower defaults on a payment vary depending on company policy, the borrower’s contract, and state law.
Joshua Cohen, a student loan attorney, told Business Insider, “The only recourse available to a private lender is to sue, and they are using those under state law and every state is different.
Private student loan companies are known to aggressively sue students for defaulting on their loans. For example, the National Collegiate, the country’s largest holder of private student loans, lost a series of court cases across the country because it sued borrowers without having the necessary documents. In these cases, millions of debt balances were settled.
In an emailed statement, New York Attorney General Eric T. Schneiderman told CNBC Make It: “These reports are deeply troubling, but unfortunately are in keeping with the increasingly cynical and free culture we have seen. that the student loan industry has taken over. “
There are steps you can take to protect yourself. Avoid predatory private loan companies and for-profit colleges and find the payment plan that’s right for you.
If you’ve already borrowed money and a private debtor is suing you, make sure the accuser has all the necessary documents.
10 Shocking Choices to Take If You Can’t Pay Your Student Loans
Student loan debt is a big responsibility and it is also a growing crisis among graduates. You should never go into debt with the assumption that you can get out of it. But if there is a possibility of defaulting on your student loans, there is nothing wrong with taking them out.
Are there ways to avoid defaulting on My student loans? Don’t cross your fingers and hope they forget about you.
If you can’t pay your student loans because times are tough, here are some options to consider.
#1. Go for refinancing
Because student loans don’t go away, it’s important to make them manageable. For some borrowers, student loan refinancing can be a good way to lower interest rates, lower monthly payments, and combine all of your loans into one monthly payment.
This is especially true if you have good credit and a good track record (if those are a little shaky, you could also hire a co-borrower for better terms). You can refinance federal or private loans or a combination of both.
Keep in mind that refinancing will disqualify you from government deferral and income-based payment programs, but it could save you hundreds of dollars on your payments each month.
#2. Reach Out to a Student Loan Lender
Rather than leaving your federal or private loans in the dark, consider contacting your credit bureau immediately if you are unable to make your student loan payments.
Your loan manager can discuss options with you and help you keep track of your loans so you can take steps to avoid student loan default.
#3. Consider Changing Your Repayment Plan
You can also change your repayment plan if you’re having trouble keeping up with federal student loans.
Most federal student loans are eligible for income-oriented plans, which limit your monthly payments to 10-20% of your discretionary income.
Here are the different types of payment plans
Federal loans have some repayment plans. Let’s look at some of the different options available.
Standard, Graduated, and Extended Repayment Plans
A standard payment plan has a fixed monthly payment. While a graduated or progressive payment plan starts your payments with a smaller amount and increases gradually. Meanwhile, an extended payment plan lets you choose: your payments can be fixed or progressive.
Repayment periods for standard and progressive payment plans can be up to 10 years for individual loans or up to 30 years if your loans are consolidated. For extended payment plans, it can take up to 25 years.
Income-generated payment plans
There are also installment payment plans (also known as REPAYE and PAYE plans), but they often end up costing more than the standard 10-year payment plan.
#4. Apply for a Direct Consolidation Loan
If you’re having trouble keeping track of multiple monthly payments, consider consolidating. Federal student loan holders can apply for a direct consolidation loan, which consolidates their loans into a single loan from a single lender and one monthly payment.
There are no application fees and most federal student loans are eligible for consolidation. Private student loan holders are not eligible for a direct consolidation loan.
However, if you have a combination of private and federal loans, the federal loans will still be eligible for consolidation and full student loan debt. The inclusion of private student loans will affect how long you have to pay off your direct consolidation loan.
Since consolidation can give you up to 30 years to pay off your loans, your new monthly payment may be less than your current payments. The bad side? You’ll likely pay more interest over the life of the loan and may miss out on some benefits like lower interest rates and cancellation benefits.
For this reason, it is important to weigh the costs and benefits before consolidation.
